Marketing Channel Systems

1
Part 1

• Marketing Channel Systems

2
Primer on The Basics

• What is Marketing?

3
Primer on The Basics

• What is Marketing?

• Marketing is an organizational function and a set
  of processes for creating, communicating, and
  delivering value to customers and for managing
  customer relationships in ways that benefit the
  organization and its stakeholders. (Lusch and
  Marshall 2004)
• Competition for a Differential Advantage
  (Alderson 1957)

4
Primer on The Basics

• What is the Marketing Concept?

• A management philosophy which advocates that a
  business organization (or channel)

5
Primer on The Basics

• What is the Marketing Concept?

• A management philosophy which advocates that a
  business organization (or channel)
• Exists to identify and satisfy the needs of its
  customers (i.e., customer orientation)
• That a customer orientation is accomplished
  through an integrative effort throughout the firm
  or channel (i.e., integrated effort)
• That the firms (or channels) focus should be
  long-term and seek to provide a satisfactory
  return on owners investment (ROI) (i.e.,
  long-term profit orientation)

6
Primer on The Basics

• What are the Eight (8) General Marketing
  Functions?

7
Primer on The Basics

• What are the Eight (8) General Marketing
  Functions?

• Buying
• Selling
• Storing
• Transporting

• Sorting
• Financing
• Information Gathering
• Risk Taking

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Primer on The Basics

• What Purpose do
• Marketing Channels Perform?

9
Primer on The Basics

• What Purpose do
• Marketing Channels Perform?

• Make products and services conveniently available
  to customers when, where, and how they want them
  in order to satisfy demand.
• The farmer, egg, grocery store example.

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Chapter 1

• Marketing Channel Concepts

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Why the growing importance of marketing channels?

Objective 1
1
1. The explosion of information
technology and E-commerce 2. A greater
difficulty in gaining a sustainable competitive
advantage 3. The growing power of
distributors, especially retailers in marketing
channels 4. The need to reduce distribution
costs
12
The explosion of information technology
and E-commerce
1. 2. A greater difficulty in gaining a
sustainable competitive advantage 3. The
growing power of distributors, especially
retailers in marketing channels 4. The need
to reduce distribution costs
1

The prediction Disintermediation reduction of
number of intermediaries

Yahoo!
eBay Amazon.com

The reality
Reintermediationevolution of a new type of
intermediary
E-commerce is more an evolution than a revolution
in marketing.
13
The explosion of information technology
and E-commerce
1. 2. A greater difficulty in gaining a
sustainable competitive advantage 3. The
growing power of distributors, especially
retailers in marketing channels 4. The need
to reduce distribution costs
1

14
A greater difficulty in gaining a sustainable
competitive advantage

1
1. The explosion of information technology
and E- commerce 2. 3. The growing
power of distributors, especially retailers in
marketing channels 4. The need to
reduce distribution costs
Place (distribution), or Marketing Channel
Strategy
Sustainable competitive advantage
Potential for gaining competitive advantage
because place is more difficult for
competitors to copy
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The growing power of
distributors
1
1. The explosion of information technology
and E-commerce 2. A greater difficulty in
gaining a sustainable competitive advantage 3.
4. The need to reduce distribution costs
Power retailers as gatekeepers of consumer markets
Act as buying agents for customers rather than
as selling agents for manufacturers
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The need to reduce distribution costs
1
1. The explosion of information technology
and E-commerce 2. A greater difficulty in
gaining a sustainable competitive advantage 3.
The growing power of distributors 4.
Marketing channels are the most recent target for
reducing distribution costs.
The focus is on channel structure and management.
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What is a marketing channel?
Objective 2
1
Outside the firm
Firm involved in negotiatory functions
Managements involvement in the process

• External contactual organization that management
  operates to achieve its distribution objectives

Goals that change, causing variations in
contactual organizations involved
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What is a channel manager?
1

• Anyone in a firm or organization who is involved
  in marketing channel decision making

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How does marketing channel strategy relate to the
rest of the marketing mix?
Objective 3
1
Marketing Mix or the four Ps Challenges
Product Limited ability to gain and hold competitive advantage
Price Price wars erode profitability provide unstable basis for sustaining competitive advantage
Promotion Expensive and short-lived
Place (Distribution) Marketing channels support enhance other Ps to meet demands of target markets
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The change of focus to channel strategy
1

• Creates competitive advantage with long-term
  viability
• Builds strong relationships between manufacturers
  and channel members
• Based on trust, confidence,
• and people power

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Channel Strategy and Logistics Management
1
Parts of the Place or Distribution Variable
Concerned with entire process of starting and
operating contactual organization Formulated
before logistics management
Focused specifically on providing product
availability at appropriate time place
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5 Primary Marketing Channel Flows
1
Objective 4
Product Flow
Negotiation Flow
Ownership Flow
Information Flow
Promotion Flow
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Product Flow
1
Manufacturer
Transportation Company
Wholesalers
Retailers
Consumers
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Negotiation Flow
1
Manufacturer
Wholesalers
Retailers
Consumers
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Ownership Flow
1
Manufacturer
Wholesalers
Retailers
Consumers
26
Information Flow
1
Manufacturer
Transportation Company
Wholesalers
Retailers
Consumers
27
Promotion Flow
1
Manufacturer
Advertising Agency
Wholesalers
Retailers
Consumers
28
Distribution through intermediaries
Objective 5
1
Factors that determine the role of intermediaries
Technology the Internet Economic
Specialization Considerations
Division of Labor
Contactual Efficiency
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Channel Structure v. Ancillary Structure
Objective 6
1
Channel Structure The group of channel members
to which a set of distribution tasks has been
allocated
Why are single-channel structures currently the
exception?
Ancillary Structure The group of institutions
that assist channel members in performing
distribution tasks
Why is managing the ancillary structure most
likely to be less complex than managing the
channel structure?